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A True "Black Swan": How unpaid internships were good, but are now bad

I love when a movie comes out that makes me smarter, even without watching it. A good example is The Black Swan. I had never heard of such a thing and had no idea what it symbolized before Fox bombed the airwaves with commercials featuring dark, elegant-looking shots of Natalie Portman in ominous poses. Intrigued, I looked up the metaphorical use of a black swan in literature and film. I learned that a black swan represents an event that surprises the observer, has a major effect on the observer and others, which is usually negative, but is often inappropriately rationalized in hindsight.

How appropriate...

Legal nerds may already be familiar with the ruling from the Southern District of New York in the Glatt v. Fox Searchlight Pictures that unpaid interns were entitled to back pay because their internships with Fox working on The Black Swan benefitted Fox more than the interns. Judge William H. Pauley III held that the two unpaid interns were really employees under the Fair Labor Standards Act ("FLSA"). Judge Pauley also held that the employees could continue the lawsuit as a class action, which allows potentially hundreds, or even thousands, of former unpaid interns to jump in with their hands out.

Judge Pauley's ruling sounds like a clear fit for the black swan metaphor. The ruling is a big change from the unwritten rule that allowed many industries to accept the help of unpaid interns to do grunt work in order to make industry contacts and learn their craft in a practical environment to augment their academic experience.

Sadly, the Black Swan case is but one of many recent cases in which unpaid interns sued their former companies, having decided after-the-fact that they would not work without being paid. In 2012, several large companies were sued by former interns, including the Charlie Rose Show, Hearst Corporation, and Elite Model Management Corp. This trend appears to be on the rise, particularly as companies affected by such district court cases appeal the decisions to the federal appellate courts.

The common thread in all of these cases is that the judges applied the six element test developed by the Department of Labor ("DOL") for determining if a worker is an intern or an employee:

  1. Is the worker provided with training similar to what she would receive in an educational environment?
  2. Is the internship experience for the benefit of the worker?
  3. Does the worker perform tasks under close supervision of existing staff without displacing regular employees?
  4. Does the employer that provides the training derive no immediate advantage from the activities of the worker/have its operations impeded as a result of the worker?
  5. Is the intern aware that s/he is not necessarily entitled to a job at the conclusion of his or her service?
  6. Do both the employer and the worker understand that the worker is not entitled to wages for the time spent at the company?

All of the questions above must be answered yes in order for a worker's service to be properly qualified as an internship versus regular employment. Any employer with questions about whether a worker's service would satisfy the test should seek legal advice to ensure that they will not later have their own black swan conundrum.

"Internship-Gate" embodies the epitome of the old adage "penny wise and pound foolish." The analogy is obvious for the workers. When I was an unpaid intern many years ago, I got much more than $10.00 an hour, or whatever was the market rate for my duties. I got a mentor. I got contacts. I got substantive experience. I got an award when I graduated for my volunteer service. People noticed my commitment and skills. Those interns who are so short-sighted as to sue an employer that gave them a chance to prove and improve themselves will have a tough time finding jobs in their industry or any other.

The analogy is also true for the DOL. The DOL's Mission statement is:

To foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights. (Emphasis added.)

Internships, even when unpaid, advance a student's ability to gain future profitable employment by providing the real-world experience students cannot receive in a classroom, thus making them more attractive to employers upon graduation. Sometimes the tasks performed by entry-level employees are unglamorous, like assembling furniture and making lunch orders, like on the set of The Black Swan. Internships are supposed to provide a practical application and observation of the information and skills students learned in the classroom. By making it more onerous for employers to offer internships, fewer employers will want to run the risk that the internship class today will be the class-action plaintiffs of tomorrow. As internships become scarcer, students will be less prepared for the jobs of tomorrow and our workforce will be less competitive globally. In the end, The Black Swan effect may be as much of an albatross around students' necks as it is for employers. But, I am sure DOL will rationalize this in hindsight...

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